The wage revision of the Central Government employees is carried out through the Central Pay Commissions which, considering the magnitude of employees, is a time consuming process. The 7th Central Pay Commission (CPC) set up by the Government will require a reasonable time frame to go into the matter judiciously especially because the implementation of 6th CPC recommendations have given rise to large number of issues and cadre related grievances.

During the past, the methodology adopted for compensating the erosion in the real value of wages due to price rise as reflected in high rate of DA to Government employees before the date of the submission of Pay Commission Report and its acceptance by the Government, had always been though the mechanism of merger of a portion of DA with Pay. The merger of DA to partially compensate the erosion in the real wages was first done in pursuance of the Gadgil Committee in the post 2nd Pay Commission period. The 3rd CPC had recommended such merger of the DA when it crossed 36%. The Government agreed to merge 60% and later the whole of the DA before the 4th CPC was set up. The 5th CPC merged 98% of DA with pay. The 5th CPC had also recommended that the DA must be merged with pay and treated as pay for computing all allowances as and when the percentage of Dearness compensation exceeds 50%. Accordingly even before the setting up of the 6th CPC the DA to the extent of 50% was merged with pay.

Presently, the factual position is that as on 1.1.2014, the Dearness compensation is 100% and will exceed the same with effect from 1.7.2014. Since the 7th CPC has been set up and one of the issues to be dealt with by the CPC would relate to revision in the existing reference base of price index, it becomes all the more necessary that the Government takes steps to merge at least 50% of DA with pay to compensate the erosion of the real value of wages immediately.